Allen Buchanan: The downside of moving your company out of state

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Some business owners dream of moving to a state with lower costs all around. But it’s wise to note that other states lack much of what Californians take for granted: an educated labor pool, available industrial facilities and great weather that keeps productivity high. (iStockphoto)

Yesterday, I concluded a meeting with a local manufacturing and distribution company. Family owned and operated by two California-born and raised principals, the business has experienced exponential growth over the last couple of years.

That seven-year lease signed in 2015 — which was to adequately house the operation — has now become a liability as the operation is bursting at the seams. All measures have been taken to efficiently use the space available — creative material handling, automation, storing product off-site, outsourcing. But the fact remains: the company will have to move before the lease terminates in 2022.

Three options are now on the table: relocate down the street to space 50 percent bigger or a move out of California to either of two business-friendly states. Moving a mile or two down the road is a simple fix with measurable benefits such as more space, less disruption, employees retained, done! However, this ownership has seized the opportunity to consider another more forward-thinking and long-term solution – Move east — like, well east of the 57 Freeway.

As previously described, a move out of California carries significant upsides including a more business-friendly environment, fewer regulations, cheaper housing, no state income taxes and utility subsidies.

But with the ying of reasons to move, there is also the yang of negatives. That downside, dear reader, is the subject of today’s column. So, before you load that moving van, please consider the following.

Lack of available buildings: Even with the desperately low availability of commercial real estate these days we still have created a base of existing buildings that totals billions of square feet. Anaheim alone has close to 100 million square feet of existing industrial buildings. A visit to Allen, Texas or Greenville, S.C., and you’ll find acres of vacant land but very little standing inventory.

In those states, the onus is placed on you to build a facility. Even with a land gift and streamlined permitting you’re looking at 12 to 18 months of construction. Don’t forget the land freezes in certain places east of here. Oh and yes, consider other delays — such as rain.

Skilled labor shortages: If your operation requires a level of expertise to operate computer numeric machines or tool medical devices, you may be sorely disappointed in the labor pool. Granted, states are working with community colleges to train people with the necessary chops, but you’re still looking at a deficit.

It’s difficult to move back: Once you decide to sell that home in Corona Del Mar and move to Nashville, Tenn., the barriers for re-entry are akin to an Apollo spacecraft returning from lunar orbit. Sure, you can keep your place here but our Golden State will want a taste of the company’s profits, which defeats the purpose of an out-of-state location.

Cultural differences: There is no place quite like California — even with its warts. This from a man who lived his formative years well south and east of here. It’s said in the South, “folks will treat you nicely but won’t trust you unless they trusted your grandfather.” Where do you think the “good-old-boy network” originated? My 85-year-old mom still refers to her neighboring Cooper Rubber execs as the Yankees up the street. The family moved there in 1965! Just sayin’.

The WEATHER! Folks who have never experienced six weeks of sleety ugliness each year take for granted the 300-plus days of sunshine we enjoy. What’s overlooked is the loss of employee productivity where the weather is a factor. Sure, four seasons are cool – -unless you have to live through them. If you want to see leaves turning — or snow — just make a weekend jaunt to Oak Glen. There! Seasonal fix administered.

Allen C. Buchanan, SIOR is a principal with Lee & Associates Commercial Real Estate Services. He can be reached at 714.564.7104 or abuchanan@lee-associates.com